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Server sales sag in the middle

Cheap servers and expensive ones are looking fit, says IDC, but midrange models need to hit the StairMaster.

The cheap and the expensive are selling when it comes to server computers.

According to a report slated to be released Friday by research firm IDC, the worldwide server market hit $11.5 billion in the second quarter, up 6.9 percent from the same period in 2003. IDC found server revenue growth at both the low and high ends of the market. Revenue for "volume servers"--those priced less than $25,000--grew 21 percent, and revenue for servers priced at $500,000 or more grew 6.1 percent. Revenue for so-called "midrange enterprise servers"--those priced between $25,000 and $499,999--declined 11.7 percent.

Information technology spending "remained strong overall with server consolidation activities continuing to drive demand for high-end systems," said a statement from Matt Eastwood, program director of Global Enterprise Server Solutions at IDC. "The pattern in spending during the quarter demonstrates the bifurcation of the server marketplace, with growth at both the high and low ends of the computing spectrum."

IDC said IBM retained its crown as king of server revenue--echoing the results of a similar report by analysis firm Gartner released earlier in the week. IBM captured 32.5 percent of the market in terms of revenue, with its server systems revenue rising 11.7 percent year-over-year to $3.7 billion, according to IDC.

Hewlett-Packard ranked second, with 27.1 percent market share, but its revenue growth did not keep pace with the overall market. HP's server revenue rose 4.6 percent to $3.1 billion. Sun Microsystems ranked third in revenue market share, with 12.5 percent. But it too lost ground, with growth of 0.2 percent to $1.4 billion. Dell was fourth, with 9.1 percent share. Its server revenue rose 7.3 percent to $1.1 billion.

In terms of unit shipments, HP ranked first, according to IDC. Sun experienced strong unit shipment growth, IDC said. Sun's unit shipments rose 33.8 percent on a year-over-year basis, the largest increase for a top 5 server vendor in the second quarter, IDC said.

One key to IBM's success was continued momentum for its zSeries machines. IDC said revenue for the IBM OS/390 server market grew 40.6 percent year-over-year, reaching nearly $1.5 billion. It was the third consecutive quarter of significant revenue growth for IBM's zSeries platform, following a number of hardware enhancements and cost-related changes in the past 18 months, according to IDC.